McDonald’s franchisees are furious that the company’s aggressive promotions and costly restaurant upgrades are squeezing their profits, according to a new survey.
“Growth for McDonald’s is over,” one franchisee wrote in response to the survey by financial services firm Janney Capital Markets.
“I am just hoping to be flat,” another franchisee said. “[The] customer has lost faith in the brand.”
“We are leaderless,” said a third. A fourth franchisee complained, “They are being successful in bankrupting us.”
For the survey, Janney Capital Markets interviewed 32 domestic franchisees representing 256 stores. McDonald’s has more than 14,000 locations in the US.
The franchisees surveyed said their same-store sales fell by 3.6% in September.
McDonald’s global same-store sales declined 3.7% in August, marking the worst monthly drop in more than a decade. The company, which reports third quarter earnings on Tuesday, has recorded negative same-store sales in the U.S. for the last two consecutive quarters.
In an attempt to drive up traffic, the Oak Brook, Ill.-based burger chain has expanded its dollar menu and run several promotions offering free coffee during the morning hours.
A half dozen franchisees said they are counting on the company’s Monopoly promotion to revive sales.
“Everything depends on Monopoly,” one franchisee said. “I am counting on Monopoly to stop the bleeding,” said another.
Most of the franchisees surveyed were extremely negative about the future of the company.
“Nothing positive to say about McDonald’s or its future,” one respondent said.
“We just have nothing new to offer our customers,” said another.
A third lamented, “Even remodels and rebuilds don’t build sales anymore,” while a fourth said, “Just hoping we’ve hit bottom.”
Many complained that the company hasn’t followed through on its promise to simplify the menu.
McDonald’s Chief Operating Officer Tim Fenton admitted in January that the company “overcomplicated” the menu “with too many new products, too fast” and “didn’t give restaurants an opportunity to breathe.”
“All talk, no action,” one franchisee wrote. “They continue to add more items (and admittedly will add more) even though they talk about reducing the menu. Top management is clueless as to what goes on in the stores.”
A second franchisee wrote, “They simplify… and then just add more products. I don’t think that anyone at McDonald’s really has a strong vision for the brand.”
Franchisees also complained that costly restaurant upgrades are forcing them into debt.
“We must stop the madness of tearing apart or tearing down perfectly good buildings,” one respondent wrote. “The owner/operators can’t handle the debt since there is little sales increase.”
Another wrote, “There are many McDonald’s franchisees who took on a lot of debt to improve McDonald’s real estate and now they are waiting for McDonald’s corporate to come to the rescue. They will probably wait too long and end up on the street.”
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